On July 12, 2022, at 8:15 AM ET, PepsiCo (NASDAQ:PEP) will hold a conference call to announce Q2 2022 earnings results.

One of the “big names” to report earnings during the eagerly awaited start of the earnings season will be PepsiCo (NASDAQ: PEP). On July 12, the business will release its second-quarter earnings report prior to the start of trading. 

TraderFactor’s analysts forecast $1.72 in profits per share on roughly $19.5 billion in revenue.

This earnings season, meanwhile, will focus more on a company’s outlook for the remainder of 2022 than on whether it beats or misses expectations. 

Given this situation, PepsiCo’s projection will probably serve as a signpost for investors searching for any indication of a market reversal.

I won’t offend you by using exaggeration when I declare that this is the most significant earnings season ever. It does, however, have a disproportionately large relevance. 

This is because many analysts are predicting that a “earnings recession” will begin in the most recent quarter. A firm like PepsiCo will have a lot to say about the state of the American consumer if that is the case.

Are We Seeing The End Of The Pandemic?

PepsiCo is a multifaceted corporation. They have grown to be a titan of snacking. The business is now positioned as a defensive stock as a result. 

The pandemic put this in stark relief. In order to lessen the impact of the downturn in the restaurant and entertainment industries, consumers started stockpiling their pantries.

This pattern continued till 2021. The company’s profits per share (EPS) and revenue have increased year over year (YOY) for at least six consecutive quarters. 

Unsurprisingly, PEP stock has increased by 64% since the start of the pandemic.

However, the growth is sluggish. Investors would be pleased with an approximate increase of 13 percent in both EPS and sales if they compared the company’s performance for the entire year of 2021 to those for the entire year of 2020. 

However, PepsiCo’s gain in the “what have you done for me lately” category is slowing down.

If the analysts’ predictions come true, PepsiCo’s trailing twelve-month earnings increase will be 4%. 

Additionally, the growth will only be about 2 percent between the first two quarters of 2022 and the corresponding two quarters in 2021.

Will Pepsi’s Proposal Succeed or Fail?

In its most recent earnings release, PepsiCo forecasted organic sales growth of about 8%.

Investors will be watching the company closely to see if it sticks to its guidance. In our judgment, the corporation may be reducing its guidance by one or two percentage points.

Ramon L. Laguarta, CEO of PepsiCo, provided the following evaluation of customer sentiment during the company’s most recent earnings call:

“We believe that the consumer’s adjustment to the new inflationary environment is still in its early stages. I predict that consumers will adopt more novel behaviors as they adjust to the new reality. The behavior of consumers will change. They may quit going out more, traveling, and other activities. We therefore believe the process is just beginning. Our categories, in my opinion, often perform fairly well in inflationary [environments].”

We concur that PepsiCo has pricing power. 

Even yet, the company is anticipated to see sustained pressure on its margins given that the CPI, which will be released this week, will probably show that inflationary pressures are not abating. 

It won’t be shocking if the corporation reduces that 8% by one or two percentage points.

 If so, it will validate what many analysts and investors already believe: that the negative profit projection will affect all industries, including defensive giants like PepsiCo.

Growth Will Continue

I don’t want to give the incorrect impression by saying that I think PepsiCo will probably cut its guidance. 

The day before earnings in 2022, PEP stock is only down 1.5 percent, and it has gained around 3 percent over the previous 30 days. That’s nothing to be alarmed about in the current market.

And that doesn’t even take into account the company’s dividend, which now pays out $4.60 annually with a dividend yield of 2.69 percent. 

Not to mention that the company has increased its dividend every single year for the past 51 years, making it a dividend king. 

That can significantly contribute to safeguarding an investor’s overall return.

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